tv Bloomberg Daybreak Europe Bloomberg June 15, 2018 1:00am-2:30am EDT
♪ anna: sree vidya bhaktavatsalam -- good morning from bloomberg's headquarters in the city of london. nejra: these are today's top stories. anna: trade confrontation. donnell said -- donald trump is said to have signed off on 50 billion dollars worth of tariffs. nejra: the fed and ecb striking different tones, how will it play out? opponents.t a delay in quitting the eu is a real possibility, this as theresa may faces another tumultuous week in parliament.
♪ good morning, everybody. this is "bloomberg daybreak: europe." it has just gone 6:00 in london. let's have a look at the risk radar. let's take everyone to where we are on the asian equity session. we are waiting for news, for confirmation from president trump. we understand he has signed off on chinesef tariffs products worth $50 billion. we don't know exactly where those tariffs are going to fall and we are waiting for more news from china. they have told us they are going to retaliate. -- what we are waiting for this morning.
mario draghi was dovish at his press conference yesterday. we have stabilized a little bit on euro-dollar, so one point -- 1.1570. dollar strength has been quite a feature of this week. the dollar is headed for its best week since 2016. bble as aa yen wo result of that. let's have a look at the s&p futures. we have got a flat picture across the futures spectrum in the united states. it was the nasdaq yesterday that was leading the gains. the nasdaq was doing quite nicely on the back of technology gains. we saw the markets closing yesterday more solidly in the united states, closing higher. treasuries is the week around 2.29% -- close the week around 2.29%. we spiked above 3% this week,
but back down below it. nejra: one thing that really demonstrates this is that treasury bond spread. it hit its highest since 1989 at the end of may. mario draghi kind of put -- to that. we saw the 10 year bond yield dropped six basis points. but how widely the treasury bond spread is it you could say that a little bit of mean reversion can be property for -- profitable. investors shows euro that there are higher bond yields on it currency basis versus --. least formething at
others out there who are talking about that spread tightening on treasury bonds to take into account. anna: let's tell viewers what is coming up this morning. we had time before the world cup. to a former ecb board member. she joins us here at bloomberg television at 8:30 a.m. u.k. time. no doubt the oil conversation with opec will be discussed. and what we heard from mario draghi. let's get the bloomberg first word news update with the juliette saly in singapore. juliette: the bank of japan has lifted monetary policy -- left monetary policy unchanged and downgraded its assessment of inflation. it maintained the settings on its yield curve control program and asset purchases.
the central bank now sees the consumer price index in a range of 0.5%-1%. fallen behind if the global peers in what has become a very busy week percent of banks. china home prices have risen. no home prices in the 70 cities gained 0.8% from one month earlier. that compared with a 0.57% increase in april. the imf has warned that u.s. tax cuts and spending hikes are increasing reason -- risk to the global economy. thedirector conceded that trump administration has not always agreed with its view of the american economy. >> it was clear that he regards our medium-term outlook as to pessimistic. -- too pessimistic.
frankly, i hope he is right, and we are wrong. it would be good news for the u.s. and global economy as well. juliette: argentina's a central bank is getting a new chief after the monetary authority failed to stop the plunge. the previous finance minister will take over the position following the surprise recognition -- resignation. they need him to curb volatility in the currency. senior eu officials have informally discussed whether the u.k. might need to stay in the brexitst 2019 if negotiations do not accelerate. talks have stalled on the irish border and a future trade deal. officials in brussels have privately questioned whether they can finish on time.
facesomes as theresa may another showdown in parliament this week with rebel pro-eu lawmakers. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . to be talkingoing to tom mackenzie shortly about from u.s.ffs president trump on china. factory 100 in china is down by 1%. we see a boost to the nikkei. the hang seng coming back. we are being supported a little bit but tencent -- by tencent. australia's market is up. it is worth noting that singapore and several other south asian markets closed today. you see some buys coming through in south korean defense stocks, which is interesting.
it seems they are now back in favor. india,banking space in lloyd up by 2.3% -- 3.3%. anna: thank you, juliette saly in singapore with the latest on the markets. bloomberg sources say president trump has approved tariffs on about $50 billion of chinese goods. china has said it will immediately respond with levees. this could even trigger an economic slowdown. >> china completely is aware that the relationship as it exists today cannot be the relationship that we have a forever. we have to get to a better, more sustainable, equitable
relationship with china on trade , and on intellectual property. anna: that was a gary cohen speaking in washington, d.c. tom mackenzie joins us from beijing with the latest. what do we know at this stage about the sarah: -- about the tariffs? >> we know that by the end of the day on friday we will get this list of tariffs focused on high imports -- imports. there will be duties on about $50 billion worth of goods. prettys telegraphed clearly by president trump early in the week when he gave an interview and said he was going to be taking tough action on ,hina when it comes to trade but of course that does not help the global economic picture. he appears to be defined -- defying the warnings of the imf
about what this may due to the global economy. immediately we are looking for that chinese reaction. anna: we are looking for the chinese reaction and how they are -- how are they expected to respond? us theyrces have told are going to respond once the tariffs have been announced. tariffs are expected to be soon.ted -- enacted china is going to hit back pretty quickly in kind. frome expecting tariffs china on things like soybeans and aircraft as well. china has said is going to -- it is going to scrap these agreements it has had for the past few months. those will all the next and void ixed and void if
these tariffs come into effect. anna: yes, tom i know it is difficult to predict the impact this could have on china's economy. is its retaliation of to be stronger given the week at -- weaker data we have seen recently? tom: that is interesting. i think we should expect them to retaliate in kind. the bloomberg's economic team have been crunching the numbers on the impact of these sanctions. it will be minimal on the surface. if we get this tit-for-tat retaliation then it will have a bigger impact. it looks like we will have a slowdown of some degree in the second half for china.
it makes china's domestic problems just that much more tricky to focus on. longer-term, it seems to be we are getting a broad consensus in washington on check swing -- tackling china's technology ambitions. really interesting when you tie to separate out -- try to separate out those in washington. thank you very much, bloomberg's china correspondent joining us from beijing. in studio here in london is simon french, chief economist at panmure gordon. ultimately, are we heading for a negotiated solution on trade between china and the united states? and it is going to be a roller coaster ride to get there? simon: not imminently.
i think you have to look at this as being linked to the u.s. equatorial cycle -- electoral cycle. anna: what we are hearing is that the refined list of process -- products to be hit with be focused on the technologies in which china looks to establish itself as a leader. simon: this all stems from the u.s. trade representative identifying and election will property theft -- intellectual property theft as a key element to not really the trade deficit today, but the trade deficit of the future. i think this is absolutely where the white house will focus in. whether it inhibits china's economy, because it is not clear to me that blocking joint ventures and technological transfers actually inhibits the
ability --. ? how can -- ? how concerned about -- how concerned are you with the chinese growth story? china is sitting on its biggest cash flow deficit in six years. war, see a prolonged trade trade standoff even, that does not look positive. simon: it does not. i think this is a great chart from the terminal. the thing that you worry about in a slowdown is that a lot of the u.s. dollar denominated debt, and the broader yuan --ominated debt has to be simultaneously when the dollar is becoming more expensive, interest-rate moving up.
you feel there is a perfect storm for chinese corporate's. on the issue about interest rates rising and the fed, one of the questions has been why the pboc did not follow suit. should we actually focus on that? a have given us an indication that all is a little bit week in quarter two in the chinese economy. you are picking up on the retail sales this week that were soft and quarter to -- in quarter two. this is very easy and we have had many conversations over the last few years about this cyclical downturn. theways caution on taking policy ammunition available to both pboc, but also through fiscal policy, and infrastructure spending. anna: a little bit on something that tom mackenzie just mentioned.
he was a siding and editorial -- citing an editorial saying that chinese and other countries -- china and other countries should join together to counter donald trump's trade policies. is that just naive to assume that you can cut the u.s. out of the sort of mood music around trade? it was a fascinating part of the interview. vos, whenback to da president xi talked. in a scenario where the imf and european union, and china are warning about a more protectionist stance on the u.s., there is at least an --ological -- that
ideological indication that they can come around. i think we are a long way from that. anna: they say that they suspect if the u.s. is blocked -- china is blocked from doing certain deals around technology in the united states, they could china come shopping in europe a little bit more for technology? >> absolutely. angle to talk about is how this impacts the negotiations between the u.s. and north korea as well. >> thank you so much, simon french, chief economist at panmure gordon. the central bank falls further behind global peers. what does it mean for the world third-largest economy? we discuss that next. forum takes the ecb place in portugal. president mario draghi speaks alongside his counterparts from boj, rba.
>> good morning, everybody. we have made it to friday. it is overcast and gloomy in singapore. asian equity markets under the weather a little bit as well as we wait from news from president trump and his team about where those tariffs will go on chinese products. let's get a bloomberg business flash with the juliette saly in singapore. $43 billionalcomm's acquisition is said to have been approved by chinese regulators. clearance from china would remove the final regulatory hurdle for the purchase, which has been pending for more than 18 months. the decision by chinese
regulators will allow the transaction to be completed ahead of a july deadline set by nxp. both companies declined to comment. at&t has completed its $85 billion acquisition of a time warner. it is the combination of a 20 month battle to enter the media business. the completion of the deal came courtours after a federal -- motion was made in washington. but the ubsas headquarters -- about the ubs asset hasrs -- ck bought ubs london. that is your bloomberg business flash. anna?
>> juliette saly in singapore commitments very much. the bank of japan is falling further behind it global peers. the central bank left the policy unchanged and downgraded its assessment. the boj is likely to continue on its own path. >> when it comes to the ending of qe, i think until the inflation prince approaches something closer to the boj's target, we are looking at continued central-bank divergence for quite some time. anna: goldman sachs japan vice chair and cohead of macro research in asia speaking there. aton french, chief economist panmure gordon is still with us. her say that the
central bank divergence is going to continue for a while. how much longer? simon: outside my forecasting horizon. the interesting thing about what the bank of japan said overnight is that it begins an actual downgrade in the inflation forecast when the reissued them in july. they are talking about less than 1% been the run rate for japan's cpi. actually having seen a steady increase, we are starting to see that roll over. if you're looking at when policy stimulus is actually going to be removed, i think we also need to consider the story we were talking about before the break. an environment of trade tariffs, or potential he a safe haven strengthens the yen, you have not that those inflationary pressures pushing through that may have second order effects into the widget settlement, which is -- wage settlement, which is what governor kuroda definitely needs.
i think we will have to wait until 2022 c eight cessation of a cessation of qe. anna: this is a chart around central-bank divergence. it does not show the whole story . this does not reflect yield targets, guidance that we have had from the ecb as well. clearly the boj is in a different place. interesting, someone from the st. louis fed has been talking about instructive and how interesting the bank of japan's policy conundrum is when you get expectations of inflation rooted at such low levels. this is the fundamental problem they have been dealing with for years. anything that can happen to change that seems incredibly elusive. simon: that's right. let's cut them some slack.
lots of the responsibility for some of the structural changes are actually the gift of the politicians in terms of this for policy reform, -- fiscal policy reform, demographic reform. there is a series of a structural issues which governor kuroda is not in control of. >> when it comes to the yen, you said it could strengthen because of the trade tensions, but will weakenactually we can -- ? simon: if you look at the behavior of key g5 currencies this year, it has actually been based on geopolitical effects rather than on policy divergence. in the medium long-term you would expect the yield spread to drive up, but in the short term, no. anna: thank you so much, simon french from panmure gordon stays with us.
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anna: 6:30 a.m. in london andanna: 2:30 p.m. in tokyo. the bank of japan staying pat on policy. we see the dollar slightly on the front foot against the yen. the dollar overall headed for its best week since 2016. let's get a broader check on the markets. >> mixed bag in asia really. we have this start in china, down 0.6%. onmp has approved tariffs chinese goods worth about $50 billion. japan higher today. we heard from the bank of japan, they left monetary policy
unchanged. let's take a look at the currency markets. euroh draghi hitting the as the ecb said it would phase out asset purchases by the end of the year. it pledged to keep interest rates at current record lows at least until the summer of 2019. while we do have the euro dropping in white, we have the dollar headed for its best week since 2016. the fed is signaled additional tightening in 2018 and i want to take a look at the peso. quite a story there. new boss at the argentina central-bank, he was previously the finance minister and is stepping into the surprise recognition of the current chief -- resignation of the current chief. his first job is to make out a cohesive monetary policy. look at the red line. that is when they hiked up 40%, highest in the world. they have the biggest alone on
record from the imf. the peso continues to plunge. that is the white line versus the dollar. anna: thanks very much. let's get a bloomberg first word news update with juliette saly in singapore. u.s. president donald trump has approved tariffs on chinese goods worth about $50 billion. trump administration is preparing to release a refined list of chinese products to be hit with tariffs that hones in on technologies which china wants to establish itself as a leader in. the move would ratchet up a confrontation on trade. china's home prices rose by the most in 19 months in may, even as the government pressed ahead with a two-year campaign to curb property speculation. new home prices in 70 cities tracked by the government gained 0.8% from a month earlier.
that u.s. taxrned cuts and public spending hikes are increasing risk to the global economy by boosting debt, potentially stoking inflation, and pushing the dollar higher. the managing director conceded that the trump administration has not always agreed with its view of the american economy. argentina's central bank is getting a new chief after the monetary authority failed to plunge, despite obtaining the biggest alone in the history of the imf. the previous prime minister -- finance minister will take over the post following the surprise recognition -- resignation by the current chief. it has lost more than a quarter of its value -- the peso has lost more than a quarter of its value in april. senior officials have discussed
whether the u.k. will need to stay in the european union past march of 2019. we understand that officials in brussels are privately questioning whether they can finish on time. that comes as prime minister facesa may fascias -- another showdown in parliament last week -- next week. the world rich are getting a lot richer and doing so a lot faster. ,ccording to boston consulting the growing ranks of millionaires and billionaires now hold almost half of global personal wealth. that is up from less than 45% in 2012. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can of course find more stories on the bloomberg at top . anna: thank you very much, juliette saly. this is what we are watching for you today. russia's a central bank is due to make a policy announcement at 11:30 a.m. u.k. time.
i understand the increase the pension range in russia yesterday. the world cup providing a useful distraction for fiscal policy announcement. >> we will certainly want to watch that after a big week for central banks. italian prime minister giuseppe conte and french president emmanuel macron are scheduled to meet at lunchtime in paris. we will get the details on that in just a moment. anna: immigration certainly a hot topic across europe. we get a sovereign rating update from -- for the u.k. and republic and ireland. what will the ratings agencies make of that? >> let's get more on that giuseppe conte and emmanuel macron meeting. good to see you. this meeting almost got canceled. can you tell us why it is back on? macron,somehow emmanuel the french president, manage to calm down the diplomatic tensions with italy, with
giuseppe conte on wednesday night. this is after emmanuel macron criticize italy for being cynical and responsible -- irresponsible. macron told giuseppe conte on the phone on wednesday that these were not meant to be offensive -- these comments were not meant to be offensive for italy. obviously what these new solutions are that emmanuel macron is thinking of. if you look at the numbers, we had this eu-turkey agreement in 2016, which reduced the numbers to greece. we had another similar agreement between libya, italy, and the eu
last year. italy still has the highest , with more than 15,000 arrivals since the beginning of this year. >> it is interesting, isn't it? hotre as you say, pass the high turf of the immigration numbers. could this issue derail the eu unity that chronic -- emmanuel macron hopes for? in terms of taking on the trump administration on trade? >> it does seem that this eu unity could be derailed. until now, it was mostly eastern european countries rejecting these arrivals of migrants. hungary, poland, czech
republic, slovakia, who reject ed. -- rejected what the eu tried to put in place last year. this system of regulation failed. now you have the heart of italy rejecting this vessel. germany and the german chancellor, angela merkel, really under pressure within her own government and interior minister, who wants to close the german boarder. isn germany's coalition under pressure because of this migrant issue. ,hat means at the eu summit they really have to come up with new solutions in order to share this burden, and emmanuel macron eurozone may the
not be on the top of the agenda until this migrant issue is really resolved. anna: thank you so much. let's take the focus back to central banks and the ecb. mario draghi put the ecb on the road to raising interest rates. he announced that asset purchases will be phased out by the end of december. they have pledged to keep interest rates at current lows, at least for the next year. that caught investors by surprise. simon french, chief economist at panmure gordon is still with us. there was a lot of discussion about the surprise, just the fact that so much information came out, perhaps more than people expected. we have been talking about as a dovish taper, but was there anything in it for the hawks? simon: there was the fact that you get a cessation of net bond buying bite quarter 1 -- by quarter one.
i think while overall undoubtedly the reaction was dovish, i was actually surprised at how dovish it was. this was kind of might base case. i thought you would get a commitment not to change interest rates for 12 months. the ecb would like to guide to very stimulative policy up until the point where he becomes effectively -- you know, people looking at his successor. they don't want to bind the hands of his successor. >> after the middle of next year it would still be quite a short timeframe. i have got this chart that shows the effect on the euro yesterday. dovish draghi sinking
euro-dollar. do we look for euro weakness? or is this just the policy divergence of this week? and out into the rest of the year, that divergence does not start to me so much? simon: if you're trying to play the euro cross road right now, you look at the euro growth divergences. if you see the weakness of the euro being driven by week industrial production data, it is that roll over and macro cyclical indicators, rather than a renewed vision of what the policy divergence between the ecb and fed, which quite frankly we have understood for some time. those inflation dynamics going up in the u.s., stuck in vogue year in the eurozone have not -- low gear in the eurozone have not changed. ecb tot time for the start using rates as the main policy tool?
i'm guessing, yes, given what we heard yesterday? simon: they will be consistent with other central bank guidance achieve a rate increases before rolling off of their balance sheet in totality. they want to get some headroom for interest rates, because they feel that is the more effective to a forget a downturn. downturn -- if we get a downturn. so yes. the end of reinvestment is a more efficient tool to gradually tighten market conditions. >> a lot of people said that was the question, the elephant in the room, reducing the balance sheet, and just how much liquidity they need to begin the system. can i ask you about brexit? we have seen a tumultuous week in u.k. politics.
it looks like we are set up for another deal that will be set to be done with pro-eu conservatives, but looks like they have fallen through. never-endum is the word we would talk about when talking about this referendum. simon: there will be some viewers of yours who would not be closely familiar with the details. a promiseear is that was made to a group of conservative back ventures early in the week to get them not to vote against the government on he issue of parliament -- votes. what was promised behind closed doors now needs to be written in legal text. it is whether theresa may can do what most commentators think she cannot.
polars appeased two opposites of her party with a set of text that gives parliament sufficient input, but not so much the people that feel that parliament wants to block brexit, is unacceptable to them. very difficult to do. what you see going forward actually on the brexit negotiation is whether that timeframe is now tenable, given what we were expecting. we were expecting this deal in june and now are talking about october. it is getting so close to the deadline that maybe there will be an extension. >> we have been hearing that the eu might tolerate some sort of an extension of that, even only for a couple of months or so. will that make a material difference? simon: anytime extension will make a material difference, given the lack of preparedness.
what is interesting about this is that if you think about it in the eyes of the european union and european commission, it does not help for them to say but how difficult it is to go through the article 15 process. it has almost been extended because it is such a fraught process. if you are worrying about contagion, it is not the most difficult concession for the eu to offer. >> simon french from panmure gordon stays with us. remember that you can browse charts featured on bloomberg, and save the charts for future reference. >> coming up, we will talk about oil and the big opec meeting set to take place in vienna next week. we will preview that. this is bloomberg. ♪
u.s. futures look like they are struggling for direction just a little bit after the gains that we saw in the s&p 500 yesterday. let's talk about oil. oil, and not football. saudi arabia and russia signaled more oil is on the way. the producers could discuss a 1.5 million barrel per day increase starting as soon as july the first at next weeks opec meeting. what can we expect next week, given that we have heard from the saudis and russians about an increase in production? >> we take them at their word. they said a production increase is inevitable. they also say that they could pre-deal.o back topre
they are talking about going back to october of 2016. basically what you need to know now is the volume and timing. this increase will offset the supply loss that we saw with venezuela. some 30% could be taken off the market by the end of next year. heavyweights you just get their way, they are going to have a tough time in vienna selling it to the rest of the group. >> to who in particular? and venezuela are adamant that they do not change the deal. venezuela, this comes down to politics. they do not think that it is fair that they are playing into washington's hands, especially for iran.
why should we help washington get prices lower? this has become a really political. we have donald trump tweeting twice already about opec. washington has quietly been asking opec for one million barrels increase. the chief investment officer of a hedge fund is talking about the political pressure and says the optics of the community are what matters. the saudi's have never had a better friend in the white house from a foreign policy perspective, and are likely to deliver a pleasantly sounding communique. >> thank you very much. warned that u.s. tax cuts and public spending hikes are increasing risks to the global economy by boosting debt,
potentially stoking inflation, and pushing the dollar higher. the funds managing director has said that the trump administration has not always agreed. >> he regards our medium-term outlook as to pessimistic, and frankly, i hope he is right, and we are rocket. -- wrong. that would be good news for the u.s. and good news for the local economy as well. >> imf managing director christine lagarde there. simon french, chief economist at panmure gordon is still with us. we were talking about this being one of the biggest weeks of the year for the global economy. it looks like this idea of the synchronized growth is concerned synchronized. -- de- growth the u.s. leading. what are the concerns with that? a strong environment where dollars a start to read feature ate because of tax
reform and upgraded growth in the u.s., it starts to the toy dollar crunch -- to a dollar crunch. we already see evidence of that. brazil, indonesia, words from the reserve bank of india, even an economy of that scale. we see something from china on the risk of dollar repatriation in an environment where you have high levels of rates in the u.s. , and much more depressed levels of growth and the rest of it evolved world? world.he developed >> this is that the so falling -- peso falling, reaching a new low. do you think that this changes the fed's thinking at all? situation, orm. does the fed think that you took out the dollar debt, and you have to deal with it? ter.n: the lat
i have not seen any evidence that the federal reserve is getting -- giving any consideration to the pleas. that is going to have to get material is worse and have -- materially worse and have a feedback loop into the eu before the even have it on their radar. what are far away from international -- we are far away from international conditions influencing eu growth. the u.s. labor market is quite tight by all measures. riskmes with inflationary to the upside, but we are still an environment globally where deflationary pressures are omnipotent. it is less of a risk to u.s. growth at the moment, given prevailing conditions and the
rest of the world -- in the rest of the world. >> i spoke to someone from j.p. morgan yesterday. he said we are pretty late cycle, but if you get a boost to productivity, or investment in the u.s. economy, that could prolong the cycle. do we still see the on the horizon? simon: you are very late cycle. if you look at the peak in u.s. corporate profit margins, we are now 14 courses since the peak. there have only been two expansions in the last -- years that have gone longer than this. we have not seen much evidence, particularly on the productivity side, globally of that driving. you have to see a structural change in a way that you are not actually seeing from public policy in the u.s.. >> let's talk football and not
just because you have saudi arabia in your --. russia crushed saudi arabia in the opening match of the world cup, 5-0. we have matches later today. here at bloomberg we are following the world cup. how do the economies stack up? we also look at gdp per capita and benchmark yield. i love how we have to put an economic spin on that. bloomberg doing well on finding an economic angle. this is $17 billion worth of players on the pitch at this world cup, which is pretty phenomenal. our commiserations to you on the saudi job. good luck to you for the rest of the world cup. thank you so much for joining us, simon french, chief economist at panmure gordon.
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>> good morning. i am nejra cehic. anna: i am anna edwards. this is "bloomberg daybreak: europe." here's today's top stories. nejra: donald trump has signed off on tariffs for $50 billion worth of chinese goods. when and how will beijing retaliate. anna: closing out a major week for major banks. the fed in the ecb striking very different tones, how will divergence play out. nejra: brexit postponement. voices suggest a delay. this is theresa may -- as theresa may faces a tumultuous week in parliament. ♪
nejra: good morning it let's bring you breaking news. in the retail sector, we've got those numbers from and attack showing the growth margin increasing and earnings overall beating as well. take a look at how h&m is doing. second quarter sales coming in at 51.9 8 billion krone. estimates was for 52.55. we have seen a little bit of a mess when it comes to second quarter sales. some of the lines coming through, 4800 and the first year.r versus 4498 jan a couple of lines coming through. anna: breaking news continues. let's get to glencore and the mining sector. we got a red headline. glencore to restart payments to the sanctioned billionaire, the
is really billionaire. he is sanctioned for alleged corruption. glencore had to review their relationship with this individual. he is a former partner in the democratic republic of congo. they are to restart payments to billionaire.d details on how they plan to do that. we are getting numbers from tesla. -- test go. a 2.1% increase because of estimates of 1.9% increased. the ceo has been a four years. where are they going to hamper growth? not sufficiently to throw them off is these numbers. up by more what is estimated. real changing sector, nejra.
it could lose its number one crown. nejra: a couple of stocks but you want to watch at the open. we are going to get that european equity market open in over an hour. wincing equities gaining fda desk gaining yesterday in terms of directionality. looks at we could see a slight bit of softness in the ftse 100. dax and cac 40 features meanwhile point higher. anna: let's talk about the risk radar. the msci asia pacific a little lackluster. we are waiting for news from president trump. we understand he side off on the need to impose sanctions on china. we don't know which products. suddenly that is what we were talking about last hour. more details on that and how will china retaliate. one of the big developments has
been what we heard from mario draghi over the ecb. -- over at the ecb. we stabilized on euro-dollar. weakness in the euro yesterday as a result of the dovishness from draghi. dollar strength partly fled related but the dollar heading for its best week since 2016. the yen was little weaker. no moves but what they said about efficient. s&p futures will be flat at the start of the trading day. this today, equities in the u.s. got a boost. lot of m&a speculation. nejra: we did see yields, a little bit on the 10 year treasuries. not as much as we saw in europe. treasury at 2.9% steady. what we could see from the cash market open and bonds in europe. that is happening now. judging at what we are looking at here, yesterday we saw the 10-year bund yields move six
basis points to get to 43 basis points following what markets seem to interpret as a dovish taper from mario draghi. we could see that 10-year yield is down again. we really did see the peripheral yields drop. we could see that happening again judging by the futures. anna: we are some eu carbon session numbers rising. 1.3 99 million. were iners and losers terms of the percentage moves. this is one. if your interested in the car sector, we had his concerns about president trump and a sanction of the car sector. isn't like what he sees for the car sector. coming up, geraldine sundstrom of pimco europe. she will be joining at nine
clock a.m. london time. here is juliette saly. thank you, the bank of japan has left its monetary policy unchanged. downgraded its assessment of inflation. as expected it maintained its control program and asset registers did it now sees the consumer price index in a range of half of 1%. the boj falls behind its global peers. rose on the prices most in 19 months in may even if the government pressed ahead with a two-year campaign to curb property speculation. prices in seven cities gained 81% from a month earlier compared to a .527% in april -- .57% in april. argentines at a bank is getting a new chief. failed to stop the peso's
plunge. peevishly the finance minister will take over the post following federico stirs in a surprise resignation. he needs to curb volatility in the currency. senior eu officials have informally discussed whether the u.k. might need to stay on the bloc past march 2019 if negotiations don't accelerate. officials in brussels have questioned whether they can finish on time. that comes as theresa may faces another showdown in parliament with rebel pro-eu lawmakers. the world's rich are getting a lot richer in doing so a lot faster. the growing ranks of millionaires and billionaires
now holds almost half of global personal wealth. that is up from less than 45% in 2012. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top go. very much a mixed teacher here in asia for the final trading day of what has been a very weak desk very busy week. -- very busy week. the boj making no moves. a lot of what is coming through in chinese stocks as the u.s. tariffs reportedly looms. and yet fairly flat and we had a lot of markets out of action for public holidays here in singapore. let's have a look at stocks. resume trade following u.s. penalties for the first time since april.
over the course of the week, the h shares in hong kong down 45%. nomura saying the asian could fall by another 38% and shenzhen. -- in shenzhen. you are seeing some upside come through in electronic makers in japan today. the yen holding of around monitor 10. -- around 110. nejra: president trump has approved tariffs on around $50 billion of chinese goods. china will retaliate with levy. tom mackenzie joins us from beijing with the latest. good to see you again it what do we know at the test see you again. what do we know at this stage? theywhat we are hearing is have narrowed it down some from the 1300 items that were
published back in april. they have been in this two-month consultation. it narrowlye focused on imports from china into the u.s. about $50 billion worth of goods as you say. this comes despite some overtures that china has made to the trump administration, whether that is market access. of course, reports out today that china potential he will be signing off on a merger between cal come in an expedient as a thank you for president trump make the telecoms maker it back into business. it seems like trump is going to be pursuing this tariff regime. the tariffs are expected to follow. >> a lot of mutual backscratching going on. if we see this ratcheting up of trade tensions, we haven't seen
the pboc follow the fed. some people suggest are we seeing a weaker phase of the chinese economy? >> when you speak to economists they seem to be coming around that the second half is going to be soft on the bank. the disappointing retail numbers. as you say the signals from this is a bank here seems to suggest they are cautious now about the economy. bloomberg economics don't think that the tariffs are going to dent the growth picture too much. you did this tit-for-tat action in it that leads to a trade war, it becomes more concerning. longer-term it seems you have and lawmakers both democrats and republicans focusing firmly on china's tech ambitions. that is going to be more of a challenge for these two countries as they negotiate. china has shown willingness to increase support around its industrial policy.
it has drawn something of a red line. nejra: thank you so much. tom mackenzie for us. joining us now is jub hurren. thanks for being with us. as we have heard there is a longer-term picture. it is difficult to predict what might happen to china's economy. when it comes to positioning, are there points of vulnerability? jub: the recent data has signaled that there is a deleveraging effort taking hold. they are not only going through a slowing but we are seeing a rebalancing. being less reliant on investment led growth. that has wins and losses. if you look at some of the european luxury goods sales in europe, it has been quite strong. a lot of that has been china led growth.
yes, it is something to be very aware of. there are winnings in losing's. the bigger picture is they need to keep monetary policy quite a loose setting. it means as you are trying to deleverage an economy that is through education gdp, you need to keep just rates well contained. we expect monetary policy to stay loose. anna: this chart illustrating the size of the trade deficit that we have seen in terms of trump's relationship. trump has said to approved tariffs to $15 billion on chinese goods. what is your base case for others ends -- your best case for how this ends? perhaps it will take a long time. not expected to become -- to come anytime before midterm.
>> a pullback from a global major trade war. a major terrorist in the market at the moment. we are getting know it's out of u.s. companies that are getting hit by these retaliatory measures. , chops have seen so far tactics are meant to come out as a very aggressive gambit and then think -- and then things look very different. we wouldn't expect to see an agreement with north korea and the u.s. it is difficult to position too much on these short-term headlines because they can flip on a dime so quickly. should be that we are not going to have a full-blown trade war. reducing the deficit is a key goal. it is not going to go away overnight. >> we have seen sensitivity in the fx markets. how does this translate into your world of fixed income? anyhe big question is
flight to quality bit and fixed income because if we do get a global trade war, the shock to global growth is going to have an impact. there's going to be big demand for risk off assets. that would happen at a time when markets are trying to press economic picture that is more reflationary. hike central banks interest rates. what could be will that in the short-term if you do get this big hit for global growth. that completely changes the picture. anna: that is relevant. jub hurren, he stays with us on daybreak. we are getting some headlines coming out of china. this mix is very much into the competition. we haven't heard from the u.s. administration about where these tariffs are going to fall. they are going to be announced today. china will take appropriate measures if the u.s. rules out its tariffs -- rolls out its
tariffs. it is not news in the sense that china already said they would retaliate. nejra: it is retaliating -- it is reiterating altra deals are off. -- reiterating all trade deals are off. it does fit into what we are talking about next which is the u.s. economy focusing ahead of the rest of the world for now. what does that mean for global central banks? we will discuss that next. anna: 20 of such a bank action this week. next week, ecb and mario draghi will be there. he will speak alongside his counterpart from the fed, boj and rba. an all-star central banking lineup. tv.h that live on bloomberg this is bloomberg. ♪
>> welcome back. this is "bloomberg daybreak: europe." a subject we have talked about a lot this week. renewed north korean and u.s. relations could mean opportunity in the regime's deeply discounted debt. join us now, sree vidya bhaktavatsalam. very good to have you on the program. valuable opportunity? you know, you have to think about the fact that these bonds have not traded in a very long time. these bonds, there is lots of caveats attached to the availability of these bonds. first nobody knows where to find them. the second is markets are still frozen until u.s. sanctions remain in place.
anthis point, what it is is expression of a desire that money managers around the world, there is a rekindling the possibility that they might be able to invest in north korea once again. the quest for this elusive bond is really an expressive up -- expression of that. nejra: elusive as you call it, three. what kind of upset are they looking at? sree: the last time these bonds traded into the sun -- in 2013 before trading halted, the estimates from exotics which specializes in these types of distressed securities. the estimates were they were trading in single digits on the dollar.
the hedge fund managers that we spoke to estimated that they are trading at 20 to $.30 on the dollar. market is revived and there bonds ever trade at par. we're looking at a significant windfall. you: i like the way preference this composition by saying no one is really sure where to find these things. a great story. brilliant front cover. sree vidya bhaktavatsalam joining us there on the subject of that story that you see. u.s. economy is sprinting ahead of the rest. that is at least for now. u.s. sales rose the most in may. ecb trimmed its
outlook for 2018 while china is showing signs it's not up the data there. hurren is still with us could north korean bonds -- with us. the three and bonds are little out of your comfort zone. , wen the week we have had have the situation, the u.s. does seem to be setting the pace in terms of where the growth is most exciting. jub: risk sentiment has soured in the last couple of weeks specifically in emerging markets. that flight to quality that treasuries have investors minds, we think the bigger picture is quite bearish. pathed have laid out their of normalization they are telling the markets they are not far away from tightening policy.
we are seeing some tightness in the labor market. up 5%. they put it into the models, that is going to look very low. discountings still their ability to lay out what they laid out -- ability to lay out. when we look at the supply and demand dynamic, we are seeing such a banks achieving net sales of treasuries for the first time in a couple of decades. on that supply side, things look very different this year. nejra: on that point, and if we talk about central bank divergence, bill gross said that is trade of the year was that spread needs to come down. i've got a chart here showing you how bund yields are higher when you take into account -- if you look at this chart. treasury bund spreads despite
the fact gets wider. >> the distortion we have is why the funds in the u.s. yield curve. the fact that you are paying 3% in a euro-dollar hedge, that is what is led by interest rates. we pick up for investing in tenure treasuries is really there. that is true if you are in europe, japan. it is why we haven't seen that come back into the treasury market. if anything, we think that is the market that has to be supported them ethically in the u.s. and not by central bank anymore. the fed is going to be selling their balance sheet. the treasure markets now rely on things like pension funds, insurance companies in the u.s. and they don't have the buying power to match the supply. >> there is a lot to talk about when it comes to supply. in the that out for us divergent monetary policy we are seeing.
in terms of the u.s. growth story, i have this conversation yesterday about how long in the tooth is the growth story in the united states. jpmorgan was saying it company start to invest, you can add another leg to the growth engine. does that work for you? happens when you get quite extensive physical expansion in an economy that don't need it. we got last year in the form of tax cuts the trump and magician put through. that hasn't set through through the numbers yet. it is great for business confidence. we could extend the cycle further. long-term was the neutral rate of interest. could be a little bit higher. nejra: thank you for joining us. jub hurren. that is it for "bloomberg daybreak: europe."
guy: welcome to "bloomberg markets: european open." we're live from our european headquarters. i am guy johnson in london alongside matt miller back in berlin. matt: i am back in berlin finally. we are looking at a mixed trade overnight in asia. a similar look for futures as we start the end of the week. the cash trade is less than 30 minutes away. guy: trade front and center is trump to appro